Learn more about whether you are eligible for the IC-DISC to save you money! For most companies, the steps are as seamless as laid out below when working with our program that focuses exclusively on the IC-DISC. 

What is the IC-DISC?
How can It help my business?

The Interest Charge Domestic International Sales Corporation ("IC-DISC") federal tax incentive was provided by Congress to aid businesses that sell, license or lease goods for use outside the United States. The items need to be at least partially made, produced, grown or extracted domestically.  Certain services also qualify. The IC-DISC has historically had bipartisan support and is the last in a long line of export incentives. Prior incentives have been challenged by our trade partners and subsequently phased out by Congress. However, the IC-DISC remains unchallenged by the EU and other trade partners. The IC-DISC reduces the effective federal tax rate on a large portion (at least half) of qualified income taxed at the top ordinary rate (29.6% to 40.8%) down to 23.8%. This is an immediate and permanent tax savings. Use of the IC-DISC is recommended by the U.S. Department of Commerce.

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Who can Benefit?

Manufacturers, recyclers, distributors, software companies, farmers, engineers, architects, food processers, brokers, and others can enjoy tax savings if they are making qualified sales.  For pass-through companies this is usually done using the structure illustrated above. However, an IC-DISC may be owned directly by shareholders that own or control the related operating company (whether a C-Corporation, partnership, or S-Corp). Most often however, the IC-DISC is owned in this "brother-sister" manner (see Diagram B) because it is the only way to achieve tax savings for a closely held C-Corporation. Passthrough entities also may use this structure for succession and compensation purposes. Use of an IC-DISC with a privately held C-Corporation will eliminate double taxation on the amount of the commission. This is typically the most tax advantageous method for owners to take earnings out of a C-Corporation.

Foreign public companies and individual foreign owners have claimed permanent tax benefits using more aggressive structures. (see below)  Domestic public company use of the IC-DISC is rare as no permanent tax savings are realized. Benefits are limited to deferral for such entities.

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How Much Time Will it Take?

Typically, with our turnkey set up assistance package, the time invested to implement an IC-DISC is 2-3 hours. Recurring annual time investment to attain benefits are similar with our help.

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Will this Affect Business Operations?

No, a commission IC-DISC has no effect on business operations whatsoever. Customers will not know the IC-DISC exists, and it usually performs no activities of any kind and holds no assets other than the required minimal working capital of approximately, $2,500. 

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Is It Aggressive or a Tax Shelter?

No, use of an IC-DISC is recommended by the U.S. Dept. of Commerce and is specifically authorized by the Internal Revenue Code and Regulations. There are aggressive structures utilizing the IC-DISC in a manner not contemplated by, or contrary to, the IC-DISC regulations. These may involve foreign owners of an IC-DISC or IRA owned IC-DISCs. Misunderstanding or lack of awareness of the requirements for sales to be eligible or permissible IC-DISC commission calculation methods often result in missed opportunities, or results that are not permitted or properly documented in case of audit. If you are interested in evaluating your current IC-DISC for risks and opportunities, please contact Quantitax.

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How Much Does it Cost?

Turnkey implementation usually costs between $4,000 and $8,000. However, before proposing an implementation, Quantitax will provide a complimentary feasibility analysis to ensure the IC-DISC makes sense. On an annual basis, costs to compute the IC-DISC commission and perform the needed annual compliance (including the Form 1120 IC-DISC tax return) are based on a number of factors. When preparing the feasibility analysis, Quantitax will also provide a cost estimate for annual needs. The Quantitax Difference makes us the best choice for your IC-DISC implementation, computation, and compliance.

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